The Toyota Motor Company 1.
IntroductionAny corporations that deal with competition must encounter an era where the success of their operation depends on both internal and external factors. Under such circumstances, it is useful to carry out an analysis that takes into account not only the company’s internal factors, but also external factors such as activities of the company’s competitors and current industry situation as well.In the fast-changing business environment like automobile industry, any automakers must take suitable decision in order to ensure that their automobile products match exactly their customers’ needs.Currently, there are many business analysis tools that organizations may use depending forces that influence the companies and the complexity of markets they serve.
Automobile industry is a business that exhibits fierce competition due to the large number of providers or vehicle manufacturers in addition to the variety of customers’ preferences that spawn many kinds of vehicle type like SUV (Sport Utility Vehicle), MPV (Multi Purpose Vehicle), race cars etcetera.In addition, the need to understand automobile industry is imperative since the industry experiences fast-changing environment that demands automakers to obtain appropriate strategy to win the market. Toyota as an automaker that produces several kinds of vehicles for a variety of segments realizes the condition and perform appropriate move by developing multi brands to compete with competitors that have various products in several segments.There are several reasons why Toyota and other multi-brand developers decide to manufacture and maintain multi brands in their product lines as following:§ Customers have diverse behavior that cannot meet with a single product offering§ Customer relationship improvements in other industries§ Fierce competition in automobile industry throughout the world Concerning the discussion on automobile industry, this paper will elaborate the brief summary of Toyota, especially, discussing the underlying reasons behind the selection of Toyota as the topic of discussion.
In order to develop the formulation of reasons of Toyota’s selection, this paper will also discuss the analysis of Toyota’s performance. 2. Corporate Background of Toyota Motor Corporation AustraliaA good example of a multinational company that alters its strategic move significantly in order to gain powerful presence in the new emerging markets is Toyota. The company generally has a strategy of assembling car parts within the local markets but with engines and vital parts imported from Japan.
This generates more assurance in terms of quality because the Japanese manufacturer has a high manufacturing standards and more dependable technology. However, this plan is not suitable for further expansion in the emerging markets because Japanese parts are expensive (Shirouzu, 2005).Today, the company had established manufacturing plants near targeted markets which eliminated the high cost of importing from Japanese producers. These plants manufactured almost all the parts in a strategic location with low cost labor like free trade zones.
The strategy aimed to increase sales number and avoiding foreign currency conversion risks. Some however, questioned how the strategy will support quality enhancement of the products with the tendency of reducing quality standards resulted by producing all the parts personally instead of importing it (Shirouzu, 2005).Toyota becomes the Japanese number one auto manufacturer that has extensive line of products from sedan to truck. In global marketplace, the company becomes the second largest auto manufacturer in terms of sales volume.
The brand equity of Toyota continues strengthening since the company acquires Daihatsu Motor Company and Hino. In 2004, Toyota and Daihatsu launched two similar products with different brand name and features in some markets (Toyota Avanza and Daihatsu Xenia).The Japanese automaker now has large market share in the U.S.
, Europe, Asia, Australia, and Africa. The raising number of sales is backed up by Toyota Financial Services that help the segments of Toyota in increasing their sales volume.To be specific, Toyota Australia existed in 1958 when Theiss Brothers imported the first model of LandCruiser. Meanwhile, the first manufacture facilities in Australia started operating in 1963 in Melbourne factory of Australian Motor Industries (AMI – Toyota).
The two popular models that produced in the facility are Corolla and Corona, which soon followed by introduction of Toyota Camry since 1987 (Toyota Motor Corporation Australia Limited, 2008 – history).In addition, the commercial vehicle business grew to be Theiss Toyota in 1971 and within eight years of operation they reached their commercial leadership in 1979. In addition, AMI Toyota began investing in an engine and stamping plant to strengthen its position as a high local content vehicle manufacturer (Toyota Motor Corporation Australia Limited, 2008 – history).Table 1 TimelineSource: Toyota Motor Corporation Australia Limited, 2008 – history In 1988, the local operations were merged to form Toyota Motor Corporation Australia.
The objective of the new combined operations is to restructure and strengthen the group to be competitive in international market. The popular result of the combined operations was the introduction of Toyota in 1994-95 that marked Altona plant in Melbourne (Australia) to be a new world-ranking the manufacturing facility (Toyota Motor Corporation Australia Limited, 2008 – history). Table 1 show the development of Toyota Motor Australia within the past decade where it shows the launch of TRD Aurion last year. 3.
Why Choose Toyota?3.1 Internal Analysis of Toyota Motor Corporation AustraliaThe first analysis that takes into account the internal and external environment is SWOT analysis. Below is the internal analysis of Toyota Motor Corporation Australia that justify why Toyota is noteworthy to be topics of discussion 3.1.
1 Key PerformanceCurrently, when multi brands of vehicle exist in the Australian market, Toyota remains their dominance in Australian car industry with incredible sales record. According to the Motor Report Auto News (2007), Australian manufactured models reached an incredible 75 percent increase in sales compared to the same period last year. Figure 1 AurionSource: Motor Report Auto News (2007) Moreover, VFACTS figures highlight those Toyota dealers can sell more than 17,400 Camry sedans till the end of August (below 13,000 vehicles within the same period in 2006). One of popular model is the six-cylinder Aurion that reached the 15,000 sales (Figure 1).
Table 2 Key Performance of Toyota Motor Corporation Australia (01 Jan – 31 Dec 2007)Financial DataSales Revenue$9.284 billionTotal Assets$2.478 billionProductionVehicles148,931Engines112,415Domestic SalesToyota236,647Lexus8,199ExportsVehicles97,688Export countries23Revenue (incl parts)$1.7 billionDealer networkToyota dealerships211Lexus dealerships18Dealer employees11,300 (approx)Source: Toyota Motor Corporation Australia Limited.
2008 – Facts In terms of financial performance, as of March 31 2005, the company has 24 trillion yen of total asset. Revenue from the consolidated business of the year is 18 trillion yen and net income for the year in 1.7 trillion yen. Sales in Japan dominated the revenue, followed by sales in United States and Europe.
Despite having larger amount of assets compare to Honda, the company has significantly smaller inventory turnover, which indicated that growth is not as fast as Honda. However, the company has a significantly lower level of gearing (Annual Report, 2005). 3.1.
2 Strategy and Competitive AdvantagesOne of the most notable competitive advantages of the company is the Toyota Production System that boost performance substantially since the mid 80’s. American companies have been actively trying to take benefits from their study of the Toyota Production System. Toyota stated that TPS has a ground of a value-based production system. This means that innovations within the production systems are directed to deliver more value to customers rather than making harassing demands to suppliers in order to cut costs.
It involves collaboration with suppliers to deliver highest possible value to customers (Teresko, 2006).Other notable quality is its marketing strategy and the function of Toyota Financial Services. The company has a considerable share in foreign markets because of its product design and pricing strategy. The company provided developing nations with local automobiles that displays Toyota’s leading brand, but with relatively cheaper prices.
Furthermore, Toyota Financial Services helps the company to sell more cars to mid-size customers. 3.1.3 StrengthsStrengths are components of internal analysis.
The components describe any resources and capabilities that support a company to achieve its competitive advantage such as patents, excellent reputation, low-cost structure and many more.In Toyota, the strengths of the company are their capability to have appropriate a vehicle launch process. This is important since the time to market becomes one element of a company’s success. Among North American manufacturers, Toyota is in the second place behind Honda in terms of launching a new vehicle.
According to Toyota, the achievement is done so since the company has adopted an appropriate P-D-C-A Management Cycle in order to manage the process of continuous improvement. The process also enables the company and its suppliers to foster improved quality four times prior to the start of production (Smith).Another strong factor that Toyota attains is that the company already has dealership analysis in which critical dealership financial and other performance information is available in one place and more accessible to users around the company. Moreover, the data provided by the analysis tools are more accurate and calculations are more reliable.
In this manner, standard reports that used to take several hours or days to complete now can be produced with a few mouse button clicks. With dramatically improved access to data and ease-of-use, reporting and analysis that took hours or days now takes minutes, resulting in significant time and headcount savings.Knowing the potential benefits of the application, Toyota now encourages that every associate in Toyota’s headquarters and in the regional offices to use the dealership performance information to reduce the time and effort required finding and formatting data. Under such circumstances, Toyota headquarters now has more time available to focus on analysis and managing the business.
In addition to benefits of the new application in Toyota’s dealership, the application has also stimulated reporting and analysis not done before, resulting in a deeper understanding of the business. 3.1.4 WeaknessesThe second internal factors are Weaknesses.
This is simply in contrast to the strength in which the absence of specific strength might be considered as the weaknesses of the company. It includes a lack of patent protection, high-cost structure and many more.However, any internal factor could be the strength or the weakness for a company. Consider lots of human resources.
When a company could not employ and appoint them in the appropriate manner, they could the weakness for the company since it causes high-cost structure and ineffective business environment and vice versa.In Toyota, the possible weaknesses are their lack of respect to internationalization and limited brand portfolio (“Brand Management”). The two factors are important in today’s automotive industry since automobile brands tend to have worldwide influences. Similarly, the limited brand portfolio makes Toyota to have limited tools to compete with diversified products from its competitors.
Currently, Toyota has four brands: Toyota, Lexus, Hino, and Scion. While its competitors like Volkswagen has eight brands: Volkswagen, Audi, Seat, Škoda, Bugatti, Bentley, Lamborghini, and Commercial vehicles in which each brand has a specific target market. 3.1.
5 Business Level Strategy of ToyotaIn general, Toyota like other Japanese automakers has several distinctive characteristics: fostering global efficiency, worldwide orientation, centralized core activities, minimum local adaptation with improved local responsiveness, and a more transnational strategic orientation. Moreover, the company also separates the distribution channel of its high-end cars, Lexus, from other brands to ensure the effectiveness. 3.2 External Analysis: The Stronger Toyota Brand in AustraliaIn addition internal analysis, the assessment of Toyota can be done via external analysis.
In this case, we employ PEST Analysis to highlight the five forces influencing the stronger Toyota brand in Australia in particular. 3.2.1 Industry CompetitionConcerning the industry competition, we find that automobile industry has a big deal competition since there are many automakers target the same customers’ segment.
In 1998, for instance become a hard situation since the foreign operation sales declines while the costs of materials were rising.Under such circumstances, the company develops new strategy by encouraging the development of product excellence, revitalize marketing and sales tactics, and encourage the cost reduction efforts. Figure 2 shows the worldwide sales of Toyota, highlighting Toyota market share to reach 42.9% Geng (2005).
Figure 2 Global Auto RankingSource: Seeking Alpha, 2007 3.2.2 Political FactorsIn automobile industry, political factors play important parts since manufacturing facilities are built in foreign countries that have abundant resources and low-wage labors. However, these favorable factors may lead to disaster if an automaker builds high-cost facilities in a country that has high risk operation.
Similarly Toyota performs similar action when the company provides several manufacturing facilities in Thailand and Indonesia, to name a few, to serve market in Asia region. 3.2.3 Economic FactorsIn terms of financial management, Toyota is prone market risk as the result of foreign exchange rates, interest rates, and commodity prices.
However, they manage to able to minimize the risk. A system that control risk management is maintained in order to monitor foreign exchange movements, interest rate, etc. According to Toyota, the profitability per vehicle of Toyota is growing into 1,488 per vehicle (Geng, 2005). 3.
2.4 Socio-cultural FactorsAt Toyota, the company’s philosophy is to find methods to adopt sustainable development for society by designing, manufacturing, and selling products and services. This situation is obvious since Toyota always promote the practice of environmental responsibility in all departments of the company. The development of mass-produced gas/electric hybrid car and the future’s fuel cell vehicles become example of Toyota decision to become green company (Toyota Motor Sales, 2007).
3.2.5 Technological FactorsTechnology becomes an important factor in automotive industry although it is not the only one since it determines the success of their business. At GM, technology does not lies on the product itself but also the use of technology in the design and manufacturing process.
The adoption of PACE (Partners for the Advancement of CAD/CAM/CAE Education) as shown in the Figure 3 is GM’s practice to ensure engineering students receive the specialized training that new product technologies require by collaborating with industrial leaders such as EDS and Sun Microsystems to prepare engineering students for new technologies (EDS, 2004). Figure 3 Students at Purdue University School of Technology works on $116.1 million PACE softwareSource: Purdue News, 2002 In addition, the use oh high technology also helps automaker like Toyota to minimize the production time that lead to plant utilization and reduced costs. Figure 4 shows the production of Toyota in comparison of General Motors (GM).
Figure 4 Production CapacitiesSource: (Geng, 2005). 3.3 DiversificationThe diversification Toyota lies on their decision to develop Hybrid cars. For Toyota, Hybrid cars become the next revenue well since the introduction of Toyota Prius sounds like a reasonable bet fir the future of Toyota in the Australian marketplace (MSNBC, 2007).
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